Gold is being sold in the local markets at a discount of $10 per troy ounce as rising duty-free imports of gold coins and medallions from South Korea under the free trade agreement have put pressure on prices.
Bullion movement has slowed amid confusion in the market on whether the government will impose a safeguard duty on gold imports from South Korea.
"According to trade sources, nearly 25 tonnes of gold is expected to be imported from South Korea over July and August," Shekhar Bhandari, business head for global transactions (banking and precious metals) at Kotak MahindraBSE -1.01 %, told ET. "This means that the government will lose Rs 750 crore of revenue as imports are duty-free. The current account deficit is widening because of rising imports."
India imposes a 10 per cent duty on imported gold, which is not applicable to countries with which India has signed free trade agreements, including South Korea. To discourage duty-free gold imports from such countries, India had previously imposed a 12.5 per cent excise duty on gold jewellery, which was scrapped along with other local taxes when the Goods & Services Tax was introduced.
If the government does not introduce safeguard duty immediately, then imports from South Korea will likely cross 25 tonnes in July-August, said S Mehta, national secretary of the India Bullion & Jewellers Association.
IBJA on Thursday wrote to director general (safeguard), department of revenue, finance ministry, stating thatgold imports from South Korea have jumped to $338 million from July 1 to August 3 from a very negligible amount from April 1 to June 30. Around 11-12 tonnes of gold coins and medallions have arrived from South Korea as of August 9.
Source: Economictimes.indiatimes.com
